Special Report Fertilisers Global Market Outlook 2018-01-01

2018
www.fitchsolutions.com
Fertilisers:
Global Mark
Market
et Outlook
Fertilisers: Global Market Outlook | 2018
Contents
Introduction..................................................................................................................................................................................... 4
Adjusting To A Weak Demand Environment...................................................................................................................................................................... 4
Global Market Analysis ................................................................................................................................................................ 5

Fertiliser Market Outlook: Limited Upside For Prices In 2019 .................................................................................................................................... 5
Regional Outlooks .......................................................................................................................................................................10

Asia Fertiliser Outlook: Lacklustre Demand In India And China...............................................................................................................................10
Europe Fertiliser Outlook: Eastern Europe To Lead Fertiliser Demand Uptick...................................................................................................15
Americas Fertiliser Outlook: Steady Growth Outlook With Key Challenges........................................................................................................22
Africa Fertiliser Outlook: Improving Short-Term Consumption Outlook .............................................................................................................29
Data Appendix ..............................................................................................................................................................................34

Fitch Solutions Agriculture Prices And Production Forecasts..................................................................................................................................34
Fertiliser Trade Matrix ................................................................................................................................................................................................................35
© 20
2018
18 Busines
Businesss Monit
Monitor
or Int
Interna
ernational
tional L
Lttd. All rights rreserv
eserved.
ed.
All information, analysis, forecasts and data provided by Business Monitor International Ltd is for the exclusive use of subscribing persons or organisations (including those
using the service on a trial basis). All such content is copyrighted in the name of Business Monitor International Ltd, and as such no part of this content may be reproduced,
repackaged, copied or redistributed without the express consent of Business Monitor International Ltd.
All content, including forecasts, analysis and opinion, has been based on information and sources believed to be accurate and reliable at the time of publishing. Business
Monitor International Ltd makes no representation of warranty of any kind as to the accuracy or completeness of any information provided, and accepts no liability
whatsoever for any loss or damage resulting from opinion, errors, inaccuracies or omissions affecting any part of the content.
This report from Fitch Solutions Macro Research is the product of Business Monitor International Ltd, UK Company registration number 01763490 (‘BMI’), and/or Fitch
Solutions Group Ltd, UK Company registration number 08789939 (‘FSG’). BMI and FSG are both affiliates of Fitch Ratings Inc. (‘Fitch’). BMI and/or FSG is/are solely
responsible for the content of this report, without any input from Fitch. Copyright © 2018 Business Monitor International Ltd and/or Fitch Solutions Group Ltd.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
fitchsolutions.com 3
Introduction
Adjusting To A Weak Demand Environment
In this third edition of Fitch Solutions' annual 'Fertilisers: Global Market Outlook' special report, we highlight key global trends that will
unfold in the fertiliser sector over the coming years. Fertiliser markets have revived in 2018 following five years of falling prices.
Prices have been firmer amid a pick-up in demand with record crops and slightly tighter supply. Nitrogen markets have been
buoyed by the drop in Chinese exports due to domestic challenges to production while potash and phosphate new capacity
additions are taking longer than expected to come online. The improvement in financial performance fertiliser companies have
been experiencing will remain in the coming quarters, but the longer-term outlook will be more challenging.
Looking ahead, we believe prices will remain supported over the coming quarters, but they are unlikely to head
significantly higher as production capacity remains ample. The low crop price environment (which will remain in the coming
months), weak farmers' profitability and moderate crop production growth ahead will not be conducive for a strong pickup in
fertiliser demand in 2018/19.
• Structural trends in the agriculture sector point toward a mild uptrend for fertiliser prices in the coming years.
• While we believe agriculture prices have bottomed and expect mild gains going forward, demand for fertiliser will be lacklustre
due to low international food prices and slower global crop production growth.
• The trend towards 'Precision Farming' - implying drastic efficiency gains regarding fertiliser application - coupled with efforts to
rein in fiscal spending on fertiliser subsidies (India) will gain momentum in the coming years, disrupting the entire industry.
• The largest consumer, China, will see fertiliser demand trend lower amid ambitious environmental protection
regulations, while India, the second largest consumer, will record weak demand growth despite robust prospects for
agriculture production as the country moves towards application efficiency.
• In terms of relative regional performance, Asia-ex China, Latin America and Africa will be the outperformers in terms of
global fertiliser demand out to 2022. Demand in Africa has picked up strongly over recent quarters, showcasing interesting long-
term trends, but fertiliser uptake comes from a very low base.
• Given these factors, the fertiliser industry will continue to face a challenging environment and is, therefore, actively
seeking new markets, diversifying product ranges towards higher-value specialty products and striving for operational
excellence. Some forward-looking companies such as Yara and Nutrien have also started to invest in and develop new digital
solutions in order to find new sources of growth and amid the upcoming fast adoption of AgTech among farmers in developed
markets.
Global Market Analysis

Fertiliser Market Outlook: Limited Upside For Prices In 2019
Key View
• Global fertiliser prices have revived in 2018 and we believe prices will remain supported over the coming quarters. However, they
are unlikely to head significantly higher as production capacity remains ample while the ongoing low crop prices, weak farmers'
profitability and moderate crop production environment will keep a lid on demand growth.
• Nitrogen prices could perform better in line of China’s drop in exports and elevated input prices globally (coal, natural gas).
• Demand for fertiliser will be lacklustre in the coming years as the trend towards a more efficient use of fertilisers and lower
application rates will accelerate.
• In this challenging environment, some fertiliser players are starting to invest in digital solutions in order to find new sources of
growth and amidst the upcoming fast adoption of AgTech among farmers in developed markets.
Fertiliser markets have revived in 2018 following five years of falling prices. Prices have been firmer amidst a pick-up in demand with
record crops and slightly tighter supply. Nitrogen markets have been buoyed by the drop in Chinese exports due to domestic
challenges to production while potash and phosphate new capacity additions are taking longer-than-expected to come online.
Looking ahead, we believe prices will remain supported over the coming quarters, but they are unlikely to head significantly higher
as production capacity remains ample. The low crop price environment (which will remain in the coming months), weak farmers'
profitability and moderate crop production growth ahead will not be conducive for a strong pickup in fertiliser demand in 2018/19.
Structural trends in the agriculture sector point toward a mild uptrend for fertiliser prices in the coming years. While we believe
agriculture prices have bottomed and expect mild gains going forward, demand for fertiliser will be lacklustre.
Remaining Supported For Now

Fertiliser - Select Prices (USD/short tonne)
Note: 'Potash' = Green Market Fertilizer Potash Cornbelt Granular Spot Price; 'DAP' = Green Market Fertilizer DAP US Gulf NOLA Spot Price; 'Urea' = Green Market Fertilizer UREA
US Gulf NOLA Granular Spot Price. Source: Green Markets, Bloomberg, Fitch Solutions
Nitrogen prices will remain supported in the coming quarters. Input prices including natural gas and coal prices, will remain
elevated. China’s ongoing capacity rationalisation due to stricter environmental standards will keep nitrogen exports low. A
significant wave of urea capacity closing in China since 2017 as producers are facing environmental regulations and a rally in coal
prices has led to global increases in nitrogen prices. China is now moving away from capacity cuts to capacity replacement towards
cleaner and more efficient plants, but it will take time to see new plants opening. In the more medium term, most of the capacity
addition in the nitrogen market peaked in 2017 and is now behind us, following several years of strong capex growth. This should
put a floor on fertiliser prices. However, the outlook for fertiliser demand is lacklustre which will impede a strong and durable rise in
prices.
Another Challenging Year For Farm Profits In 2018

US Farms - Net Cash Income & Expense (USDbn)
f = USDA forecasts. Source: USDA, Fitch Solutions
The potash market remains in overcapacity and prices are unlikely to rise significantly higher. Heightened competition
in the potash market is here stay and former supply discipline is more difficult to achieve with the change in the market structure
that happened in 2013 when Russia’s Uralkali exited the Belarusian Potash Company (BPC), one of the two big potash export
ventures (with North America’s Canpotex). Moreover, capacity expansion decided long ago is now bearing fruit at K+S’s Bethune
mine and at Eurochem’s Usolskiy and VolgaKaliy projects. The potash market could also be rocked in the longer term by the
opening of BHP’s Jansen mega-potash project. BHP is ramping up again investment in Jansen starting in FY18 and it aims to
complete mining shafts in the next two years. Potash production could start three years after that. Initial start was supposed to be
2020 but in 2016-2017 BHP put the completion date on hold and scaled back investment.
Urea Input Prices To Remain Elevated

Global - Coking Coal, LNG & US Gas Prices
f = Fitch Solutions forecast. Sources: National sources, Fitch Solutions
Long Term Demand Trend: Only Modest Growth Ahead
We see the strongest demand growth coming from Asia-ex China, Africa and Latin America in the coming years. On the one hand,
the ongoing farm consolidation and crop intensification in developing countries will support demand for higher-value fertilisers.
However, a number of structural trends will constrain fertiliser demand growth in the coming years. First, we forecast
crop prices to remain low on a multi-year horizon, assuming no weather supply shock, which should limit fertiliser application
growth. Second, global crop production will see more moderate growth in the coming years, as acreage expansion will slow down
significantly. Thirdly, the ongoing trend towards a more efficient use of fertilisers and lower application rates will
accelerate, driven by the general global move towards 'smart farming', 'precision agriculture' and the fight against land
degradation. Developed markets will see a growing use of agricultural technology devices such as sensors and drones which will
lead to fertiliser efficiency improvements. Meanwhile, some of the largest agricultural players in developing markets, including China
and India, are looking at limiting fertiliser use due to concerns over over-application or unbalanced-application and soil degradation.
Positive Crop Production Outlook In 2019

Global - Select Crop Production (% chg y-o-y)
f = Fitch Solutions forecasts. Source: USDA, FAO, Local Statistics, Fitch Solutions
Interestingly, we note that the major fertiliser companies have high fertiliser consumption forecasts as per the market outlook
presentations they publish. For example, Nutrien in its Market Update published in July 2018 includes demand projection for the
2018-2022 period of 2.8-3.0% growth for potash and a 2.0% growth for nitrogen fertilisers. Given that fertiliser consumption grew
by a weak 0.9% in 2017/18 according to the International Fertiliser Association and is expected to expand by 0.8% in 2018/19, we
note that a 2.0-3.0% consumption growth base case over the next five years is overly ambitious in light of the trends highlighted
above.
Slight Improvement In Capacity Utilisation Ahead

Select Fertilisers - Capacity Utilisation Rate (%)
f = Green Market forecasts. Source: Green Markets, Fitch Solutions
Fertiliser Producers: Adapting To An Evolving Environment
Fertiliser producers have been benefitting from the improvement in market fundamentals this year. This follows a period of
challenging operating environment over 2014-2017 when producers were confronted with uneven global demand, low crop and
fertiliser prices, and rising market competition.Given our view for fertiliser prices to show only modest growth going forward, the
operating environment for fertiliser companies will remain challenging as producers will have to face more stringent environmental
regulations and lower application rates.
In response, the fertiliser industry is actively seeking new markets, diversifying product ranges towards higher-value specialty
products and striving for operational excellence. Market leaders in DMs are also developing new technology and digital-based
solutions in line with the upcoming fast adoption of AgTech. For example, Yara acquired in November 2017 Agronomic Technology
Corp and is currently ramping-up its digital solutions, with Sensor-aided fertiliser application, nutrient optimisation tailored to
specific fields and crop advisory platforms. In July 2018, Nutrien announced an agreement to purchase Waypoint Analytical, an
American agricultural laboratory and soil science company.
Grains Crop Outlook Key Driver Of Demand

Global - Fertiliser Use By Crop In Mn tonne nutrients (LHC) & As % of total (RHC)
Note: 2014/15 data. Source: IFA, Fitch Solutions
Regional Outlooks
Asia Fertiliser Outlook: Lacklustre Demand In India And China
Key View
• Although Asia, led by China and India, will remain the largest consumer of fertilisers globally over the coming years, consumption
growth will slow down in the coming years. The outlook for usage in China and India is lacklustre as both countries aim at
tackling severe over-application of fertilisers in their farming industries. Weak crop production prospects for China, as the country
increasingly focuses on agroindustries, also means lower prospects for fertiliser use.
• South East Asia remains the bright spot for fertiliser consumption, with Indonesia to be an outperformer and Vietnam an
underperformer. Frontier agribusiness markets in Asia such as Myanmar and Cambodia will also present interesting opportunities
in terms of fertiliser sales, although demand starts from a low base.
• Looking at production trends, the ongoing decline in China's fertiliser output is likely to continue in the coming years, which will
mean lower exports as well.
India And China Lead Global Fertiliser Consumption

Global - Consumption Of Fertilisers, 2016 (% nutrients)
Source: FAO, Fitch Solutions
Regional Demand: Mixed Outlook In 2018 And Beyond
The outlook for Asian fertiliser demand is mixed in 2018 and in the medium term. While fertiliser consumption will be strong
in South East Asia with the rise in crop production, Indian demand may not be as strong as hoped because the country has
embarked on a long-term trend towards increasing fertiliser application efficiency. China's demand will be on the decline due to
environmentally-friendly policies.
South East Asia: positive outlook in 2018 and medium term - we forecast crop production to grow robustly in the calendar
year 2018. All the countries in the region will see rice output grow in both 2017/18 and 2018/19, sugar production will also be
large and on the rise and palm oil output will expand, although Malaysia's 2018/19 output may disappoint as labour shortages may
hamper yields.
In the coming years, underlying trends for the agribusiness sector will be positive for fertiliser demand. We are particularly positive
regarding demand growth in Thailand, Indonesia and 'emerging' agribusiness countries such as Cambodia and Myanmar which are
recording robust growth in crop output. We note, for example, that fertiliser imports in Myanmar have been growing at a fast pace in
recent years. Vietnam's demand will be weak due to excessive application of fertilisers and the slowdown in crop production growth
due to area cultivated and yield expansion constraints (see 'Six Key Themes In Asia Agribusiness', July 6). The positive trends in South
East Asia will be particularly positive for nitrogen demand (rice, fruits and vegetables) and potash consumption growth (palm oil and
sugar crops, for example, need more potash-based nutrients than grains).
Fast Import Rise In Indonesia, Slower Import Growth In Thailand

Fertiliser Net Exports - Indonesia (LHC) & Thailand (RHC), '000 tonnes
Note: Negative values indicates the country is a net importer of the fertiliser. Compound = 2 or 3 elements. Source: Trade Map, Fitch Solutions
India: uncertain fertilisers sales outlook - India's fertiliser use may not expand in CY2018 despite the rise in Minimum Support
Prices announced in July for key crops (see 'Positive Outlook For Indian Agribusiness In 2018', August 8). 2018 monsoon rain over
June-August have been weak in many key agricultural states, and production for some crops including rice, corn and cotton will
decline in 2018/19. Potash fertiliser subsidies were reduced in 2018/19 (see table at the bottom), which will limit use this year.
Nitrogen subsidies were maintained and phosphate subsidies raised in line with recent price increases. Nitrogen fertiliser sales
volumes have been on the decline over the past two years since the government imposed urea to be neem-coated. In the medium
term, India's ongoing goal of improving fertiliser use efficiency will weigh on sales volumes growth. However, crop production
expansion will remain robust thanks to supportive farming policies, which should provide some support to fertiliser usage.
Stable Picture In China, Rising Imports In India

Fertiliser Net Exports - China (LHC) & India (RHC), '000 tonnes
Note: Negative values indicates the country is a net importer of the fertiliser. Compound = 2 or 3 elements. Source: Trade Map, Fitch Solutions
China: peak fertiliser demand reached - China's fertiliser sector will remain on the decline in 2018 in terms of usage as well as
production. Crop production will either decline y-o-y in 2018/19 (rice, wheat, cotton) or if it grows, absolute output will remain
below record levels seen in recent years (corn). This, coupled with an active policy to reduce overuse of fertiliser will lead to stagnant
or decreasing usage in 2018. In the medium term, China's demand for fertiliser will decline, in particular in the case of nitrogen
fertilisers. The authorities' increasingly stricter stance on environmental protection is impacting fertiliser use, as China's over-
application of inputs has led to severe soil degradation. While we are positive on the outlook for other agricultural inputs including
machinery, seeds and Agtech adoption, the outlook for fertiliser sales in China is negative.
Asia Fertiliser Outlook Clouded By Overuse

Select Countries - Fertiliser Application (kg/ha of arable land)
Source: World Bank, Fitch Solutions
China: Decline In Production Ahead
The operating environment for China's fertiliser and pesticide sector is becoming increasingly challenging amid the rise in
environmentally-friendly policies. Production has been on a fast declining trend, as fertiliser and pesticide output decrease for the
second consecutive year in 2017. Apart from stricter policies and enforcement of rules, elevated coal prices over recent years
pushed up the cost of urea production. As a result, the production capacity of ammonia and urea has been contracting over recent
years. As a result of these trends, China's fertiliser exports will most likely remain on a downtrend in the coming years.
Drastic Decline In Fertiliser Production

China - Nitrogen, Phosphorus & Potassium Fertiliser Production ('000 tonnes)
Note: YTD = Jan to July. Source: Wind, Fitch Solutions
India's Fertiliser Policy: Fertiliser Usage Imbalance To Remain For Now
India's support to agriculture via fertiliser subsidies will continue in the coming years - despite the government pledging several
times to reform India's urea subsidy arrangements - as reforming the sector may prove price-inflationary. In particular, the upcoming
general elections in 2019 means the government is unlikely to implement any policy that would hurt farmers. Very generous
subsidies, in particular for urea fertilisers, has led to fertiliser overuse, severe fertiliser use imbalance (overuse of nitrogenous
fertilisers at the expense of phosphatic and potassic fertilisers) and soil degradation and sub-optimal yields. The pressure on the
Central Government's fiscal accounts has led authorities to reduce subsidies on P and K fertilisers over recent years, while N
fertilisers subsidies are still elevated.
Prime Minister Modi implemented two other fertiliser policy changes, which are transforming the sector and are aiming at improving
its efficiency.
• Since 2015, all urea fertiliser consumed in the country must be neem-coated, which allows for a slower and more
efficient release of the nutrients into the ground. Sales of urea declined for the second consecutive year in the 2017/18 fiscal
year (ending March 2018) while agricultural production rose, as a result of the policy according to authorities. Until then urea
sales had been relentlessly rising, helped by elevated subsidies. Neem-coated urea curtails the diversion of urea to non-farm
uses and prompts a reduction of 10% in urea needed on a plot of land.

• Rolling out in 2018 of the Direct Benefit Transfer Policy, a new subsidy-dues settlement system will improve subsidy
efficiency. The Direct Benefit Transfer Policy (whereby the government pays subsidies to fertiliser companies only after they have
made authenticated sales to farmers), is another sign that the Indian government is looking at increasing efficiency in the sector.
• Urea Policy: Renewed until 2019/20 - Another aspect of fertiliser policy reform in which India has made little progress is the
change in urea prices. Urea remains the only fertiliser yet to be deregulated, and very low set prices have encouraged farmers to
increase the use of nitrogen fertiliser - creating severe imbalances in overall fertiliser consumption that have adversely affected
soil health and long-term yields. In March 2018, the government approved the extension of the Urea Subsidy Scheme until
2019/20, which means there will be no increase in the price of urea until then. Urea prices have been relatively low in recent
years, which is keeping the government's fertiliser bill largely affordable, thus limiting the need to pass controversial reforms.
INDIA FERTILISER SUBSIDY RATE UNDER THE NUTRIENT BASED SUBSIDY SCHEME
Nutrient 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19
N 23.2 27.2 24 20.9 20.9 20.9 15.9 19 18.9
P 26.3 32.3 21.8 18.7 18.7 18.7 13.2 12 15.2
K 24.5 26.8 24 18.8 15.5 15.5 15.5 12.4 11.1
Source: Ministry of Fertiliser, Fitch Solutions
Europe Fertiliser Outlook: Eastern Europe To Lead Fertiliser Demand

Uptick
Key View
• The EU will see subdued demand growth for mineral fertiliser over the next five years as high existing application rates and less
favourable growing conditions weigh on the market.
• Eastern Europe will lead a fertiliser demand uptick over the coming years, with Romania and the Black Sea region expected to
act as key outperformers.
• Ongoing EU reform negotiations relating to fertiliser use will likely result in large-scale fertiliser production and harmonised
cadmium limits for phosphate-based fertilisers.
• The potash market will remain highly competitive over 2018, while government policy and technological changes will also
impact the sector.
Between 1990 and 2011, total European mineral fertiliser consumption declined, largely as a result of already high application rates
and a decrease in the area dedicated to grains. Since then, consumption from the region has stabilised and is now growing
moderately as Eastern Europe becomes the leader in consumption growth, following its expanding agricultural production. Out to
2022, we expect Western Europe to maintain fairly stable demand for fertilisers. Eastern European countries will outperform, with
bright spots among Eastern European EU members and Black Sea countries.
Nitrogen fertilisers (including ammonium- and urea-based fertilisers) account for 70% of total fertiliser use in the EU, with the rest
divided roughly equally between phosphates and potash-based products. Nitrogen products also account for the majority of
production and trade within the region. According to Fertilizers Europe, EU countries used 11.0mn tonnes of nitrogen in 2017,
compared with 2.9mn tonnes of phosphate and 2.5mn tonnes of potash in the same period. This was applied to 134.5mn hectares
(ha), out of a total of 178.9mn ha of agricultural land in the region. Approximately 62% of fertiliser use in Europe goes towards grains
production, with wheat accounting for the lion's share of consumption.
Limited Growth In EU Fertiliser Demand; Eastern Europe To Outperform
We believe that the growth in demand for fertiliser in the EU will be limited over the next five years, particularly in Western European
countries such as the Netherlands, the UK and France - countries which already have high application rates. Moreover, we believe
that the EU as a whole will see subdued growth in wheat production through to 2022 due to our assumptions for yields to decline
and return to levels more in line with their long-term average, mainly because of less favourable growing conditions. This year, EU
wheat production fell sharply as severe droughts, heatwaves, and torrential rain have hit key wheat growing countries in Europe. We
are thus forecasting EU wheat production to remain relatively low at around 154mn tonnes in 2022 compared to 156mn tonnes in
2015.
Stronger Growth In Eastern Europe To Persist

Europe - Fertiliser Consumption By Region (mn tonnes nutrients)
Note: 'Western Europe' = Albania, Austria, Belgium, Bosnia-Herzegovina, Croatia, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Macedonia, Netherlands,
Norway, Portugal, Serbia, Slovenia, Spain, Sweden, Switzerland, and the UK; 'Eastern Europe' = Belarus, Bulgaria, Czech Republic, Hungary, Republic of Moldova, Poland, Romania,
Russian Federation, Slovak Republic, and Ukraine. Source: IFA, FAO, Fitch Solutions
The elevated share of wheat among EU grain production (around 50% on average from 2006-2018) supports our view for limited
growth in fertiliser consumption among EU countries. However, our subdued forecasts include corn and barley as well, both of
which will show virtually no production growth out to 2022. In this context, we expect Eastern EU member states to outperform
their Western counterparts. In particular, we highlight Poland and Romania as bright spots for growth in fertiliser consumption. Of
the 12 European grain producing countries which we forecast, we anticipate Poland and Romania to have the two strongest
average annual production growth rates at around 6.3% aggregate for wheat, corn and barley.
Wheat's Share Means Subdued Demand Growth

EU-28 - Grain Production By Crop ('000 tonnes)
Note: We use USDA classification for grain production; f = USDA forecast. Source: Fitch Solutions, USDA
In Poland, consumption growth will mainly come from corn, which will see increased demand from the livestock sector as feed. We
are relatively optimistic regarding Poland's livestock outlook, as the poultry sector will see increased exports to Asia while red meat
production will benefit from increased exports within the EU. In Romania, by contrast, we expect most of the growth to come from
the wheat market, which will benefit from strong export opportunities, particularly to the Middle East and North Africa. However, this
Eastern European outperformance will be partially offset by changes in the EU's Common Agricultural Policy (CAP), which will affect
income growth in developing Europe over the next two-to-three years (see below).
Outside of the EU, we expect Ukraine and Russia to outperform. Much of the growth in fertiliser consumption will be due to base
effects, as fertiliser application in the Black Sea Region is well below recommended levels, especially for phosphate and potash.
Moreover, we expect the grains sector to drive fertiliser application growth in both countries, in line with our view for the Black Sea
region to strengthen its share of the wheat export market (though wheat production in the region will decline in 2018/19 due to
unfavourable weather, overall output is still well above historical levels – our forecast of 72.2mn tonnes of wheat production in
Russia is high compared to its five-year average of 56.4mn tonnes).. Finally, farm-gate fertiliser prices are relatively high in the EU
compared to other areas of the world (a broader discussion of which can be found in our June Europe Fertiliser Outlook), which
contributes to our view that the Black Sea Region will outperform in the EU in terms of fertiliser demand growth.
Eastern Europe: Growth From A Low Base

Select Regions Total Fertiliser Consumption In 2015 (mn nutrient tonnes)
Note: EECA = Eastern Europe and Central Asia; LAC = Latin America and the Caribbean; SA = South Asia; WCE = Western and Central Europe. Source: IFA, Fitch Solutions
Key Issue 1: Fertiliser Regulations And CAP Reform
Fertilisers in Europe used to be managed under EC No. 2003/2003, which consolidated all EU rules which apply to fertilisers and
ensured technical requirements were implemented uniformly throughout the region. However, the law had two notable flaws. First,
it only applied to mineral fertilisers, which accounted for just half of total EU fertiliser usage at the time. Other fertilisers - including
organic waste-based fertilisers - were still governed by EU countries' national legislation, which led to a fragmented policy
environment. Second, policy analysts complained that the 2003 law did not limit the use of heavy metals, such as cadmium (which
is found in phosphate fertilisers). It was argued that these regulations did not fully reflect the EU fertiliser market nor does it align
with EU policy goals related to the circular economy (see below).
In 2016, new regulations [COM(2016)157 outlines amendments to (EC)1069/2009 and (EC)1107/2009] were proposed as part of
the EU's 2015 'Circular Economy Package'. The European Commission defines this as a set of policies designed 'to help European
businesses and consumers to make the transition to a stronger and more circular economy where resources are used in a more
sustainable way.' For fertilisers specifically, this has two implications. It would encourage large-scale fertiliser production from
domestic sources by transforming waste into nutrients for crop, and will introduce harmonised cadmium limits for phosphate-based
fertilisers. These new regulations were proposed by the European Commission in March 2016, and interinstitutional trilogue
negotiations between the European Comission, the Council, and the European Parliament have been ongoing since January 25
2018.
More recently, the EU Parliament voted in 2017 for radically reduced cadmium limits in phosphate based fertilisers - from 60mg/kg
and to 20mg/kg by 2030. However, the vote faced several objections both from a sector and geopolitical perspective. Farmers say
the high cost of fertilisers would become a serious concern. Furthermore, a number of MEPs in Brussels have voiced concerns that
EU fertiliser import dependency on countries like Russia (which have relatively low cadmium levels compared to Morocco, Israel, and
Egypt) would increase. Indeed, our analysis shows that, outside the EU, a significant proportion of the region's phosphate imports
come from countries that are negatively impacted by the new restrictions. Finally, the new rules would be at odds with the EU's
neighbourhood policy of supporting North and West African countries.
Russia Share Of Imports Likely To Increase

European Union - Average Phosphate Fertiliser Imports By Origin (% total value, USD)
Source: Trade Map, Fitch Solutions
In contrast to the new fertiliser-specific regulations, reform of the EU's Common Agricultural Policy will have relatively little impact
on the region's fertiliser market, but will affect the agriculture sector more broadly. The debate on the post-2020 iteration of the
EU's Common Agricultural Policy has already begun, and the focus is centred upon the perceived inadequacies of the 2013
reforms. 'Greening' requirements were the major focus of the last cycle of CAP discussions (2009-2013), but the policy choices
made in 2013 have resulted in few environmental benefits whilst simultaneously increasing the bureaucratic burden on farmers
and member state administrations. The upcoming debate on the 2018 CAP reform process is, therefore, likely to revisit the form in
which direct payments are delivered to farmers and the conditions attached to them, with a specific focus on environmental criteria.
Reformed CAP Hosts Opportunities For Precision Agriculture

Historical Development Of The CAP
Source: European Commission, Fitch Solutions
We believe that the 2018 CAP reform will maintain current level of funding (as a proportion of the overall EU budget), even though
the level of funding will be reduced in absolute terms due to the UK's departure from the European Union in 2019. That said, we
expect that the EU Commission will introduce changes to the two-pillar structure of the CAP in order to simplify environmental
regulations and facilitate the process of monitoring compliance.
The sheer complexity of the existing system will drive the reform effort as we approach the deadline for finalising the post-2020
Common Agricultural Policy. Environmental groups will lobby for a closer link between farm direct payments and environmental
outcomes, stressing the need for monitoring and evaluation across the EU member states. Their arguments will be reinforced by
economists and bureaucrats, who will emphasise the need for public funds to generate 'public goods'" while minimising the
bureaucratic burden on farmers and the EU administration. The agricultural sector will resist the most confusing and costly
regulatory measures, but will be willing to take steps to reduce their environmental impact if the CAP - which acts like a social safety
net for small farmers - is maintained at current levels and simplified.
CAP Spending Stable, But Share In Total Expenditure Falls

EU Budget Expenditure (EUR mn)
f = forecast. Source: European Commission, Fitch Solutions
We therefore expect a significant amount of disruption in the sector as farmers - who are already suffering from 'reform fatigue' -
adapt to yet another set of rules and regulations from the European Union. New environmental regulations will be innovative but
untested, and are likely to result in a number of unintended consequences over the next CAP cycle from 2020. We are maintaining
our production forecasts for now, but could revise them downwards should there be new and onerous additions to the current
regulatory environment.
Key Issue 2: Precision Agriculture Working Against EU Fertiliser Consumption
The fertiliser sector will be one of the first industries disrupted by the growing integration of 'Internet of Things' (IoT) and 'Big Data'
technology in agriculture over the coming years as these technologies will result in lower input use. Regarding Europe, we expect
the region to see strong adoption of precision agriculture due to its large and diverse agricultural production, its supportive policy
environment and its strong Agtech ecosystem. Technology start-ups in the European space include farm software, crop monitoring,
logistics, urban agriculture, and input efficiency. Input efficiency companies – including Azotic
Technologies, WIDHOC, Evja, Agricolus, SoilCares, Wingssprayer, and Dacom – will probably have the most disruptive effect
on long-term fertiliser consumption in the EU.
Leading Producers To Keep Suffering From Competition Over 2018

Global - Share Of Potassium Chloride Capacity By Company, 2013 (%)
Note: 'ICL' = Israel Chemicals Limited; 'APC' = Arab Potash Company; 'SQM' = Sociedad Quimica y Minera de Chile; 'QSLI' = Qinghai Salt Lake Potash. Source: PotashCorp
Key Issue 3: Potash Market To Remain Competitive For Former European Allies
We believe the potash market will remain very competitive into 2018, which underpins our relatively positive outlook
for Russia's Uralkali and Belarus' Belaruskali, and which will keep cooperation on hold. The potash industry is in transition from a
market dominated by trade alliances to one where smaller producers increase output to gain market share. In this context,
Belaruskali and Uralkali, the world's first and second most efficient producers, respectively, have adopted maximum output
strategies to gain market share. Despite the 2013 dissolution of the marketing alliance Uralkali and Belaruskali, which has been a
key reason for potash price weakness since, both firms will remain competitive in a subdued price environment. As they are well-
positioned to export to key Asian markets, namely China and India. For instance, in July 2017, Uralkali secured a potash import
contract with China for USD230/tonne, a slight improvement from USD219/tonne in 2016.
Americas Fertiliser Outlook: Steady Growth Outlook With Key Challenges

Key View: Fertiliser production and consumption growth in the Americas region will remain steady over the next five years to 2022.
Consolidation is already occurring in the sector, while companies will look towards industrial and feed products in order to diversify
from their main fertiliser businesses. In terms of fertiliser consumption, stronger volume growth in wheat and corn production,
compared to soybean in the Americas, will require comparatively higher degrees of fertiliser usage in the region. Finally, the use of
IoT will attempt to rationalise fertiliser consumption.
The Americas region is the world's second largest producer and consumer of fertiliser after Asia, accounting for about a fifth of
global output and a fourth of global consumption in 2014, according to the International Fertilizer Industry Association
(IFA). Fertiliser use is dominated by large agricultural producers such as the US and Brazil, while Mexico and Argentina use only a
fraction of the total regional output. We highlight a key discrepancy between two sub-regions: North America and Latin America.
Although both regions are major producers of crops and thus, consume elevated amounts of fertiliser, North America is a large
fertiliser producer and exporter while Latin America relies heavily on fertiliser imports.
A Handful Of Players Dominating The Region

Select Countries - Fertiliser Production Balance (mn nutrient tonnes)
Source: IFA, Fitch Solutions
Fertilisers: A Core Aspect Of Farming In The Americas
Fertilisers constitute a core aspect of farm profitability in the Americas, even more so than in other continents, as the region
combines large-scale agricultural production with elevated farm incomes and limited government support. American farms are
among the world's largest on average and the US, Brazil and Argentina are leading global exporters of corn and soybean, supporting
high fertiliser consumption. At the same time, American farmers receive fewer subsidies than their European or Asian counterparts,
making their income particularly dependent on global prices and export revenues.
Fertilisers: Largest Single Farm Expense

United States - Farm Operating Expenses By Crop In 2017-18 (USD/ha, avg)
Note: *Purchased irrigation water, cotton ginning and baling straw; Sources: Fitch Solutions, USDA
This means that farm incomes in the Americas are more volatile compared with other global regions, which compels farmers to
adopt a volume strategy and ensure they maintain elevated yields in order to secure revenues. Maintaining consistently elevated
yields generally requires frequent application of fertilisers, particularly nitrogen (see 'Nitrogen Fertilisers: A Primer', June 9 2016),
which makes the demand for nutrients relatively inelastic in the Americas. Financial statements for a typical US farm reflect the
strategic importance of fertilisers, as they constitute the largest single farm expense, thus, having a significant impact on a farmer's
profit margin through revenue and costs.
North American Fertiliser Sector Consolidation
In line with our view on growing consolidation in developed markets' fertiliser industries, PotashCorp and Agrium merged in
January 2018 after shareholders of both companies approved the multi-billion dollar deal in November 2016. The deal was
completed in early 2018 and the new firm is called Nutrien. Amid an oversupplied market and strong competition from low-cost
emerging market players, other North American fertiliser companies have turned to consolidation and cost-cutting. We have
previously highlighted North American potash and phosphate producers as the most vulnerable, given that they are leaders on the
global market and face elevated competition from peers in Eastern Europe and the Middle East and North Africa (MENA) region. In
contrast, North American nitrogen companies can focus on reducing the region's nitrogen deficit and can avoid competition with
lower cost producers.
PotashCorp-Agrium Deal Targets North American Market

Select Companies - Share Of North America In Total Revenue (%)
Source: Bloomberg, Fitch Solutions
The PotashCorp-Agrium deal stands out as it does not combine two fertiliser companies, but a fertiliser producer and a leading
Americas input retailer, with most synergies residing in vertical integration. The deal offers the potential for a large amount of
PotashCorp's output to be channelled to Agrium's retail network. Consequently, PotashCorp appears to target growth on its home
continent rather than attempting to undercut its competitors on the Asian market, as Belaruskali did in 2016. Although early
indications suggested that the market was sceptical about the deal, the share price was trailing the Bloomberg Fertiliser Index by 8%
as of mid-April, since then the share price has increased by 20%. Moreover, the company’s Q2 results both beat analyst expectations
and saw the company revise up its full-year adjusted EBITDA and EPS guidance.
Fertiliser Companies To Diversify Further Into Industrial Products
Along with our view for North American fertiliser producers to focus on consolidation and cost-cutting (Mosaic, for example,
announced a decrease in its dividend both in 2016 and again in 2017 and also idled some facilities), we expect companies to look
towards industrial and feed products in order to diversify from their main fertiliser business. This is already in play as PotashCorp and
Agrium announced pre-merger that some of their facilities would focus partly or fully on the production of industrial products.
Industrial products generally offer higher margins and enable companies to serve a relatively small and specialised market, in
contrast with elevated competition between bulk fertiliser producers.
Industrial Products: Better Margins Than Fertilisers

PotashCorp - Nitrogen & Phosphate Average Net Sales Price By Subsegment (USD/tonne)
Note: Nitrogen fertiliser includes ammonia and urea; nitrogen figures are adjusted for intersegment transfer to phosphates; Source: PotashCorp, Fitch Solutions
Industrial products include speciality chemicals, explosives, emission filters, pharmaceuticals and animal feed. The scope for
diversification depends on the type of fertiliser, with nitrogen offering the most opportunities, while potash has limited industrial
applications (see 'Potash Corporation Of Saskatchewan Inc', August 9 2016). Industrial use accounts for about 20% of total nitrogen
consumption, according to estimates by Yara International, and the IFA forecasts this segment to grow by almost 30% between
2014 and 2019. In contrast, fertiliser, the main user of nitrogen, will only grow by about 6% over the same period.
Americas: Solid Outlook For Fertiliser Supply And Demand Out To 2022
The Americas region will see subdued but positive growth in fertiliser production and consumption over the next five years. We
expect North American fertiliser production to remain steady out to 2022 as potash and nitrogen producers face strong incentives
to increase supply over the period. Canadian potash producers will expand output as more capacity comes online, while US
nitrogen producers will take advantage of cheap natural gas costs in order to substitute nitrogen imports with domestic production.
Northern Surplus Against Southern Deficits

Select Regions - Fertiliser Production Balance In North America (LHC) And Latin America & Caribbean (RHC), mn nutrient tonnes
Regarding fertiliser consumption, we also hold a positive view as we forecast stronger volume growth in corn and wheat production
compared to soybean in the Americas over the next five years than was seen in the 2012-2016 period. Grains require more fertiliser
than soybean, particularly nitrogen, and we expect grains outperformance in plantings to translate into higher fertiliser
consumption. In particular, we expect Brazil and the US to add more corn compared to the previous five years, which is mainly due
to buoyant performance in 2016/17 and 2017/18 and stable output out to 2020/21. Regarding wheat and soybean, Argentina is
the key driver of stronger growth for wheat but is a weaker driver for soybean growth as the Macri administration removed export
taxes and quotas on grains while maintaining them on soybean.
Finally, we highlight Argentina as a bright spot in terms of fertiliser consumption growth over the coming years, particularly due to
low base effects. Argentine farmers will benefit from President Mauricio Macri's fast-paced reforms, spurring export-driven crop
production growth and supporting fertiliser demand. Argentine farmers will also turn towards grains at the expense of soybean over
the coming seasons, which will require increasing fertiliser consumption as grains require more nutrients than soybean.
Fertiliser Spending Increases After Years Of Declines

United States - Select Inputs Spending Growth (%)
Sources: USDA, Fitch Solutions
Finally, we highlight Argentina as a bright spot in terms of fertiliser consumption growth over the coming years, particularly due to
low base effects. Argentine farmers will benefit from President Mauricio Macri's fast-paced reforms, spurring export-driven crop
production growth and supporting fertiliser demand. Argentine farmers will also turn towards grains at the expense of soybean over
the coming seasons, which will require increasing fertiliser consumption as grains require more nutrients than soybean.
Long-Term Outlook Presents Challenges
Over the long term, the increased use of IoT in the Americas will have a key impact on fertiliser usage. The Americas region will be
the main driver for precision farming over the coming years, as increases in acreage decline and the focus turns to increasing yields.
The US will see the most innovation, especially in the areas of fertilisation application, plantings, spraying and irrigation. In South
America, the focus will be on reducing waste and increasing animal protein supply.
AGTECH COMPETITIVE LANDSCAPE IN THE AMERICAS

Farm Function Companies
Precision fertiliser adapt‐N, Agrium, aWhere, CNH, DuPont, FarmersEdge, FarmSolutions, Hexagon, Monsanto, Raven,
Trimble, Geociclo
Precision planting AGCO, CNH, Deere, Great, Hawkins, Hexagon, KWS, Kinze, Raven, Trimble
Field monitoring AgDNA, aWhere, CropTrak, Hexagon, Monarch, PrecisionHawk, Raven, Trimble, Xmbots, AgroPrecisión,
Agrosat, UAV-IQ, LemSystem, Sioma
Data Management Deere, FarmersEdge, Farmlogs, Hexagon, SST, Topcon, Trimble, Monsanto, Frontec, GeoAgris,
GeoAgro, S4, AgroPrecision, BovControl, Crop Monitor, Sustentap, RITEC, Agronóstico, OKARATech,
Agribots, Agronometrics, Agroreports
Logistics Lifepack, Sontra, Safe Trace
Finance (South America) Agrofy, DTA Latam
Animal health IMEVE, Inprenha, Phage Technologies SA
Pesticidies Bio Controle, BR3 Agrotecnologia, BUG Agentes Biologicos, PROMIP, Avance Biotecnologies,
BioInsumos Nativa, Biogram, BioPacific
Source: Fitch Solutions
Regarding fertiliser specifically, the main goal is to vary fertiliser application rates in different parts of the field. Up until now, fertiliser
rate application has been relatively uniform across a field. However, with more accurate field and weather monitoring, farmers will
soon have access to tractors with sensory systems allowing for, as an example, reduced application on parts of the field where
absorption is low and increased rates where absorption is high. Companies in this new space include FarmersEdge, Raven, Farm
Solutions, Trimble and aWhere. More established fertiliser companies such as Yara and Nutrien are also exploring 'smart
fertilisers'. Precision irrigation follows a similar pattern, with the sensors being used to ration water efficiently.
Africa Fertiliser Outlook: Improving Short-Term Consumption Outlook

Key View: Low farm income levels and structural barriers will continue to constrain fertiliser consumption growth in Africa over the
long term. Consumption growth, however, will receive a short-term boost from low fertiliser prices. Sub-Saharan African countries
will see new projects coming online in the coming years, while consumption will grow at a superior rate to other regions.
Africa and the Middle East are minor consumers of fertiliser, accounting for just 3.9% of world consumption in 2014, according to
the International Fertilizer Association (IFA). Global fertiliser application rates are around 100kg/hectare. By contrast, in Africa, these
levels are around 10kg/ha. Moreover, consumption is highly concentrated among a handful of countries, with farmers in other
countries applying very limited amounts of fertiliser. In Sub-Saharan Africa (SSA), five countries (Ethiopia, Kenya, Nigeria, South Africa
and Zambia) have accounted for almost two-thirds of consumption. In the Middle East and North Africa (MENA), three countries
(Egypt, Iran and Morocco) account for three-quarters of consumption.
We highlight a key discrepancy between SSA and the MENA region. MENA has comparatively limited agricultural production, due to
a scarcity of arable land and volatile growing conditions, but does have elevated production and capacity of nitrogen and
phosphate. In contrast, SSA has vast amounts of arable land and extensive agricultural production (albeit with low yields) but, until
now, has had very limited fertiliser production – apart from South Africa.
Structural Factors Keep Regional Per Capita Consumption Low
Despite fertiliser consumption coming from a very low base across much of Africa, we believe that it will not reach similar levels to
Europe and South America until institutional problems are addressed. Many of these are similar to those that we have highlighted in
previous analyses - namely poor profitability in the sector and the dominance of small-scale, subsistence agriculture (see 'Africa
Machinery Outlook', October 19 2017). Moreover, we highlight logistics, as well as the lack of mobile technologies, storage
availability and costs as key impediments to the development of the African fertiliser industry.
Poor Transport Network Increases Cost Of Imported Fertilisers In Africa

Select Countries - Transport Network Index
Note: 100 = lowest risk; 0 = highest risk. f = Fitch Solutions. Source: Fitch Solutions
While the cost of fertiliser itself is similar for African and non-African countries, high transport costs and taxes result in inflated prices
in Africa. Roads and ports in many regions of Africa are of a poor quality, frequently congested and costly to use due to numerous
checkpoints. Infrastructure across most of the continent is poor. Therefore, it is no surprise that most large fertiliser-using countries
in SSA have access to the coast. Furthermore, the distribution process passes through a number of middlemen, resulting in higher
costs and ultimately deterring consumption. Farmers in Kenya (inland), for example, pay almost twice as much for fertilisers as
farmers in Europe according to the (Kenya) Standard. According to AfricaFertilizer, average Urea prices across 15 countries in the 12
months up to August 2018 averaged around USD500/tonne, more than double benchmark Urea prices.
African Fertilisers At A Premium

Select Countries - Urea Prices (USD/tonne)
Source: AfricaFertilizer, Fitch Solutions
The traditional scarcity of fertilisers available to SSA farmers supports illegal fertiliser trade across the region, with issues including
cross-border smuggling of subsidised fertilisers as well as the sale of counterfeit fertilisers. Moreover, international fertiliser
companies often refrain from entering partnerships with local ministries to supply subsidised nutrients due to frequent delays in
payments, which reinforce the position of illegal fertiliser traders. At the end of the supply chain, inadequate storage facilities mean
that cost-effective amounts of fertiliser cannot be regularly purchased, resulting in substantial wastage.
We believe that significant improvements in physical and financial infrastructure will need to be made in many African countries
before fertiliser consumption improves markedly. Consequently, although our Infrastructure team sees strong growth potential in
transport infrastructure among SSA countries, this is unlikely to improve the fertiliser trade in the coming years. Moreover, investors
will remain cautious in their exposure to SSA infrastructure investments, owing to the challenging operational environment, various
macroeconomic headwinds, poor access to electricity and underdeveloped financial markets.
Many SSA countries had subsidy programmes until the 1990s. These government programmes, through which farmers receive
fertiliser at below-market prices, were largely phased out during that time because the emerging consensus was that they only
marginally contributed to improved yields. However, after African governments committed to raising expenditures on agriculture
under the 2003 Maputo Declaration, many countries re-introduced them. In recent years, total expenditures on ISPs by these 10
countries have ranged from approximately USD600mn to USD1bn annually and accounted for roughly 14-26% of their combined
annual public expenditures on agriculture. However, according to Jayne et al (2018), 'overall crop production and welfare effects of
these subsidy programs tend to be smaller than expected.'
Expensive Subsidies
ISP Cost As % Share Of Public Agricultural Spending For 10 Countries*
*A full list is available upon request; Sources: Jayne et al, Fitch Solutions
Low Prices Prompt Short-Term Consumption Optimism
Although the aforementioned structural factors will constrain long-term consumption in SSA, short-term consumption growth has
outperformed, with regional consumption growing by 15% annually from 2015 until 2017 compared to just 2% globally. Nigerian
consumption alone doubled in 2017 to 1mn tonnes, while Ethiopian consumption increased by 43% over the same period. On the
trade front, OCP Group – a Moroccan state-run phosphate monopoly – saw exports of phosphate-based fertiliser increase by over
50% y-o-y in H117, while exports to SSA more almost tripled between H115 and H117, with the destinations including Nigeria,
Ethiopia and Kenya. Much of this is reflected in low phosphate prices, which we believe will remain subdued over the coming
months. We expect the region’s broad trend of strong consumption growth to continue over the coming quarters. Fertiliser markets
will remain mostly oversupplied in 2018 as production will continue to rise, in spite of low prices, while consumption growth will be
moderate.
On a global level, low crop prices, weak farmers' profitability and a moderate crop production growth environment will not be
conducive for a strong pickup in fertiliser demand, keeping prices anchored. Grain prices have been slightly firmer over recent
months, but barring a significant weather disruption, will remain low over most of 2018, compared with historical averages. It will
take several years for global markets to rebalance, particularly in the case of potash and phosphate, as these two markets will see a
significant increase in capacity over the next few years. On a short-term basis, this will be positive for African imports. However, with
food prices falling considerably in both Eastern and Southern Africa in recent quarters (after a strong run-up due to droughts), the
pace of the import growth seen in recent quarters will slow considerably.
Price Weakness Aiding Consumption

Fertiliser - Select Prices (USD/short tonne)
Note: 'Potash' = Green Market Fertiliser Potash Cornbelt Granular Spot Price; 'DAP' = Green Market Fertilizer DAP US Gulf NOLA Spot Price; 'Urea' = Green Market Fertilizer UREA
US Gulf NOLA Granular Spot Price. Source: Green Markets, Bloomberg, Fitch Solutions
Production Opportunities Exist, But Subdued Outlook For Regional Trade And Integration
We hold a favourable view on fertiliser producers in the MENA region over the coming years, while production growth will improve in
SSA as well, given the number of various new projects coming online. Access to ample reserves of natural gas and phosphate rock
at a cheap cost in comparison with competitors in North America, Asia and Eastern Europe underpins our expectations for solid
performance from fertiliser companies based in the MENA region. We highlight OCP Group, which has exclusive access to the
country's phosphate reserves, as an example of this trend, as the company is the world's largest exporter of phosphate products.
Still A Small Market For MENA Exporters

Select Regions - Fertiliser Production Balance By Product (mn nutrient tonnes)
We now hold a slightly more positive view on the near-term prospects for fertiliser production in SSA. Over recent years, companies
from Israel, China, Canada, Morocco and Indonesia have announced plans to develop resources in countries such as Togo, Guinea-
Bissau, Gabon, Uganda and Senegal. More recently, Yara announced that it was looking into creating a USD2bn construction facility
in Mozambique. Elsewhere, OCP Group is making a strong push into SSA, with projects in Ethiopia and Rwanda, in order to
manufacture fertiliser products using semi-finished merchandise shipped from its Moroccan operations. Africa accounted for about
26% of OCP's fertiliser exports in FY16, up from about 14% in 2014; the company is also well positioned to supply potential fertiliser
demand from SSA countries. Meanwhile, the African Development Bank recently approved a USD100 million loan to Nigerian firm
Indorama Eleme Fertilizer & Chemicals Limited to support the company’s plans to double its fertiliser production from 1.4 million
tonnes of urea to 2.8 million tonnes per annum.
We note that improved bilateral relations between MENA and SSA countries could support higher fertiliser consumption in the SSA
region. Angola and Morocco have made a fertiliser agreement where Morocco will provide fertiliser to the struggling Angolan
agricultural sector at affordable prices. Morocco has further signed a number of agreements with Nigeria that will support a higher
degree of local fertiliser production in Nigeria. OCP is slated to actively develop fertiliser to support Nigerian agricultural productivity.
Data Appendix
Fitch Solutions Agriculture Prices And Production Forecasts
FITCH SOLUTIONS AGRICULTURE PRICE FORECASTS
Indicator 2014 2015 2016 2017 2018f 2019f 2020f 2021f 2022f
Cocoa Price, GBP/tonne, ave 1,923.45 2,097.81 2,195.14 1,574.86 1,750.00 1,775.00 1,750.00 1,725.00 1,725.00
Coffee Price (Arabica), Usc/lb, ave 177.7 132.4 136.3 135.0 115.0 120.0 115.0 115.0 110.0
Sugar #11 Price, Usc/lb, ave 16.34 13.12 18.20 15.78 11.50 12.60 13.80 13.40 13.20
Palm Oil Price, MYR/tonne, ave 2,396.1 2,235.2 2,630.6 2,703.9 2,340.0 2,400.0 2,475.0 2,550.0 2,630.0
Cotton Price, USc/lb, ave 76.26 63.28 65.66 73.48 87.00 87.00 81.50 80.50 79.00
Wheat Price, Usc/bushel, ave 587 507 435 453 465 480 480 490 500
Soybean Price, Usc/bushel, ave 1,243 945 988 983 985 1,000 1,010 1,010 1,015
Corn Price, USc/bushel, ave 415 376 358 369 380 400 420 440 440
Rice Price, USD/cwt, ave 13.94 11.06 10.34 11.06 12.00 11.40 11.50 11.60 11.70
Note: All energy and agricultural prices refer to generic front-month except for palm oil (three-month) and coffee (second-month). Source: Bloomberg, Fitch Solutions
FITCH SOLUTIONS AGRICULTURE PRODUCTION FORECASTS
Indicator 2014 2015 2016 2017e 2018f 2019f 2020f 2021f 2022f
Cocoa Production, mn tonnes 4.37 4.23 4.00 4.74 4.59 4.60 4.71 4.82 4.94
Coffee Production, mn bags 152.3 149.1 153.1 157.7 159.7 157.6 163.1 169.5 173.0
Sugar Production, mn tonnes 175 177 164 173 191 189 186 189 192
Palm Oil Production, mn tonnes 59.4 61.9 58.9 64.9 68.5 71.3 73.9 76.8 79.9
Cotton Production, mn 480lb bales 120.37 119.19 96.51 107.19 123.31 117.56 122.16 125.35 127.56
Wheat Production, mn tonnes 715 728 735 754 758 742 763 778 792
Soybean Production, mn tonnes 293 319 312 351 335 348 356 365 374
Corn Production, mn tonnes 995 1,022 973 1,078 1,034 1,075 1,094 1,117 1,142
Rice Production, mn tonnes 478 479 472 486 487 488 494 500 507
Note: As of Septembre 7 2018. f = Fitch Solutions forecasts. Source: USDA, Local Statistics, Fitch Solutions
Fertiliser Trade Matrix

TRADE MATRIX - NITROGENOUS FERTILISERS TOP SEVEN IMPORTERS & EXPORTERS (USDMN)
IMPORTS
2010 2011 2012 2013 2014 2015 2016 2017
USA 3,078 4,208 4,882 4,122 4,339 3,896 2,121 2,285
Brazil 1,218 2,408 2,259 2,243 2,264 1,584 1,593 1,970
India 1,255 1,963 2,749 2,711 2,161 2,713 1,573 1,417
France 1,257 1,863 1,833 1,683 1,728 1,405 1,087 1,107
Turkey 664 832 848 1,036 988 736 695 850
Thailand 866 1,328 1,282 976 848 658 549 694
Mexico 521 712 893 760 791 716 618 691
EXPORTS
2010 2011 2012 2013 2014 2015 2016 2017
Russia 2,077 3,439 3,543 3,358 3,244 2,672 2,171 2,337
China 2,363 2,105 3,347 3,284 4,796 4,932 2,775 1,969
Qatar na 1,238 2,080 na na 1,753 na 1,265
Netherlands 1,159 1,691 1,866 1,654 1,520 1,305 1,001 1,133
Egypt 1,081 1,354 1,185 1,077 645 332 767 974
Saudi Arabia 1,233 1,559 1,609 1,028 1,110 1,055 867 906
Belgium 938 1,371 1,267 1,426 1,143 1,016 871 848
Note: includes top seven importers and exporters as of 2017 data. Source: Trade Map, Fitch Solutions
TRADE MATRIX - PHOSPHATIC FERTILISERS TOP SEVEN IMPORTERS & EXPORTERS (USDMN)
IMPORTS
2010 2011 2012 2013 2014 2015 2016 2017
Brazil 390 700 615 639 463 407 303 333
Indonesia 168 364 469 216 309 332 251 298
USA 69 116 117 94 173 120 80 97
Iran 282 180 33 223 188 na na 91
Bangladesh 170 419 225 157 na 297 190 85
France 105 148 122 106 81 89 77 83
Netherlands 41 81 71 75 70 60 72 68
EXPORTS
2010 2011 2012 2013 2014 2015 2016 2017
China 468 1,049 654 435 479 513 330 415
Morocco 293 393 380 418 414 314 305 306
Israel 254 303 231 285 230 207 197 202
Tunisia 276 234 218 219 226 138 119 na
Netherlands 62 110 104 101 98 85 106 91
Lebanon 98 119 85 73 73 80 29 50
Egypt 59 86 93 99 86 60 50 42
Note: includes top seven importers as of 2017 data and exporters as of 2016 data. Source: Trade Map, Fitch Solutions
TRADE MATRIX - POTASSIC FERTILISERS TOP SEVEN IMPORTERS & EXPORTERS (USDMN)
IMPORTS
2010 2011 2012 2013 2014 2015 2016 2017
USA 3,462 4,527 3,606 3,514 3,110 3,406 1,902 2,612
Brazil 2,263 3,533 3,550 3,356 2,934 2,555 2,029 2,438
China 1,909 2,781 3,020 2,444 2,556 3,009 1,761 1,764
India 1,734 1,331 1,242 1,268 1,413 1,253 1,015 1,080
Indonesia 750 1,502 1,265 987 918 937 708 805
Malaysia 745 895 763 680 636 515 456 447
Belgium 623 789 572 610 457 444 374 432
EXPORTS
2010 2011 2012 2013 2014 2015 2016 2017
Canada 5,048 6,790 6,079 5,680 4,727 5,368 3,546 3,923
Russia 2,609 2,722 3,646 2,190 2,701 2,958 1,856 2,129
Belarus 2,225 3,350 2,662 2,052 2,669 2,674 2,020 1,967
USA 1,121 1,317 1,054 1,099 931 856 477 819
Jordan 692 846 673 605 602 620 434 473
Chile 363 402 555 490 450 406 364 300
Netherlands 112 132 171 121 215 238 205 218
Note: includes top seven importers and exporters as of 2017 data. Source: Trade Map, Fitch Solutions
TRADE MATRIX - COMPOUNDS FERTILISERS TOP SEVEN IMPORTERS & EXPORTERS (USDMN)
IMPORTS
2010 2011 2012 2013 2014 2015 2016 2017
Brazil 1,065 2,489 2,138 2,629 2,754 2,032 2,057 2,568
India 3,129 5,342 3,876 1,967 2,111 3,478 1,982 1,744
USA 418 743 624 668 969 898 751 977
Thailand 911 1,045 1,139 1,190 985 836 722 789
Ukraine 268 470 514 531 362 455 567 760
Canada 398 691 619 640 704 748 663 684
Pakistan 368 470 418 302 487 639 478 656
EXPORTS
2010 2011 2012 2013 2014 2015 2016 2017
China 2,533 4,712 3,068 2,381 3,470 5,262 3,323 3,596
Russia 2,680 3,912 3,987 3,571 3,040 3,221 2,608 2,748
USA 3,063 4,325 3,444 3,091 2,863 2,808 2,299 2,307
Morocco 1,269 1,924 2,036 1,502 1,647 1,554 1,827 2,276
Belgium 769 982 917 1,200 1,069 1,026 799 865
Isreal 1,535 1,799 1,562 1,440 1,261 991 911 827
Netherlands 493 665 736 729 724 605 500 504
Note: fertilisers contained two or three of the fertilising elements nitrogen, phosphorus and potassium. Includes top seven importers and exporters as of 2017 data. Source:
Trade Map, Fitch Solutions
Fit
Fitch
ch Solutions, 30 North C
Colonnade
olonnade,, Canary W
Wharf
harf,, L
London.
ondon. E14 5GN, UK
Tel: +44 (0)20 7248 0468
Fax: +44 (0)20 7248 0467
Web: www.fitchsolutions.com
IS SN: 2514-2224
ISSN:
Copy Deadline: September 2018

opy
© 20
2018
18 Busines
Businesss Monit
Monitor
or Int
Interna
ernational
tional L
Lttd. All rights rreserv
eserved.
ed.
All information, analysis, forecasts and data provided by Business Monitor International Ltd is for the exclusive use of subscribing persons or organisations (including those
using the service on a trial basis). All such content is copyrighted in the name of Business Monitor International Ltd, and as such no part of this content may be reproduced,
repackaged, copied or redistributed without the express consent of Business Monitor International Ltd.
All content, including forecasts, analysis and opinion, has been based on information and sources believed to be accurate and reliable at the time of publishing. Business
Monitor International Ltd makes no representation of warranty of any kind as to the accuracy or completeness of any information provided, and accepts no liability
whatsoever for any loss or damage resulting from opinion, errors, inaccuracies or omissions affecting any part of the content.
This report from Fitch Solutions Macro Research is the product of Business Monitor International Ltd, UK Company registration number 01763490 (‘BMI’), and/or Fitch
Solutions Group Ltd, UK Company registration number 08789939 (‘FSG’). BMI and FSG are both affiliates of Fitch Ratings Inc. (‘Fitch’). BMI and/or FSG is/are solely
responsible for the content of this report, without any input from Fitch. Copyright © 2018 Business Monitor International Ltd and/or Fitch Solutions Group Ltd.

Special Report Fertilisers Global Market Outlook 2018-01-01

Hochgeladen von

Dokumentinformationen

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Special Report Fertilisers Global Market Outlook 2018-01-01

Hochgeladen von

Copyright:

Verfügbare Formate

2018

Global Market Analysis ................................................................................................................................................................ 5

Regional Outlooks .......................................................................................................................................................................10

Data Appendix ..............................................................................................................................................................................34

Global Market Analysis

Remaining Supported For Now

Another Challenging Year For Farm Profits In 2018

f = USDA forecasts. Source: USDA, Fitch Solutions

Urea Input Prices To Remain Elevated

f = Fitch Solutions forecast. Sources: National sources, Fitch Solutions

Long Term Demand Trend: Only Modest Growth Ahead

Positive Crop Production Outlook In 2019

Slight Improvement In Capacity Utilisation Ahead

f = Green Market forecasts. Source: Green Markets, Fitch Solutions

Fertiliser Producers: Adapting To An Evolving Environment

Grains Crop Outlook Key Driver Of Demand

Note: 2014/15 data. Source: IFA, Fitch Solutions

India And China Lead Global Fertiliser Consumption

Source: FAO, Fitch Solutions

Regional Demand: Mixed Outlook In 2018 And Beyond

Fast Import Rise In Indonesia, Slower Import Growth In Thailand

Stable Picture In China, Rising Imports In India

Asia Fertiliser Outlook Clouded By Overuse

Source: World Bank, Fitch Solutions

China: Decline In Production Ahead

Drastic Decline In Fertiliser Production

Note: YTD = Jan to July. Source: Wind, Fitch Solutions

India's Fertiliser Policy: Fertiliser Usage Imbalance To Remain For Now

uses and prompts a reduction of 10% in urea needed on a plot of land.

N 23.2 27.2 24 20.9 20.9 20.9 15.9 19 18.9

P 26.3 32.3 21.8 18.7 18.7 18.7 13.2 12 15.2

K 24.5 26.8 24 18.8 15.5 15.5 15.5 12.4 11.1

Source: Ministry of Fertiliser, Fitch Solutions

Europe Fertiliser Outlook: Eastern Europe To Lead Fertiliser Demand

Limited Growth In EU Fertiliser Demand; Eastern Europe To Outperform

Stronger Growth In Eastern Europe To Persist

Wheat's Share Means Subdued Demand Growth

Eastern Europe: Growth From A Low Base

Key Issue 1: Fertiliser Regulations And CAP Reform

Russia Share Of Imports Likely To Increase

Source: Trade Map, Fitch Solutions

Reformed CAP Hosts Opportunities For Precision Agriculture

Source: European Commission, Fitch Solutions

CAP Spending Stable, But Share In Total Expenditure Falls

f = forecast. Source: European Commission, Fitch Solutions

Key Issue 2: Precision Agriculture Working Against EU Fertiliser Consumption

Leading Producers To Keep Suffering From Competition Over 2018

Americas Fertiliser Outlook: Steady Growth Outlook With Key Challenges

A Handful Of Players Dominating The Region

Source: IFA, Fitch Solutions

Fertilisers: A Core Aspect Of Farming In The Americas

Fertilisers: Largest Single Farm Expense

North American Fertiliser Sector Consolidation

PotashCorp-Agrium Deal Targets North American Market

Source: Bloomberg, Fitch Solutions

Fertiliser Companies To Diversify Further Into Industrial Products

Industrial Products: Better Margins Than Fertilisers

Northern Surplus Against Southern Deficits

Source: IFA, Fitch Solutions

Fertiliser Spending Increases After Years Of Declines

Sources: USDA, Fitch Solutions

Long-Term Outlook Presents Challenges

AGTECH COMPETITIVE LANDSCAPE IN THE AMERICAS

Logistics Lifepack, Sontra, Safe Trace